Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty

by Abhijit V. Banerjee

To really answer the question of whether there are poverty traps, we need to know whether the real world is better represented by one graph, or by the other. And we need to make this assessment case by case: If our story is based on fertilizer, we need to know some facts about the market for fertilizer. If it is about savings, we need to know how the poor save. If the issue is nutrition and health, then we need to study those. The lack of a grand universal answer might sound vaguely disappointing, but in fact it is exactly what a policy maker should want to know—not that there are a million ways that the poor are trapped but that there are a few key factors that create the trap, and that alleviating those particular problems could set them free and point them toward a virtuous cycle of increasing wealth and investment.

ideology, ignorance, and inertia—the three I’s—on the part of the expert, the aid worker, or the local policy maker, often explain why policies fail and why aid does not have the effect it should. It is possible to make the world a better place—probably not tomorrow, but in some future that is within our reach—but we cannot get there with lazy thinking. We hope to persuade you that our patient, step-by-step approach is not only a more effective way to fight poverty, but also one that makes the world a more interesting place.